Oil and gas exploration and Production Company Apache (APA) is set to expand its Anadarko basic acreage of a highly liquids-rich fairway following an agreement to acquire privately held Cordillera Energy for $2.85 billion in cash and stock.
The Houston, Texas-based Apache's latest move to strike a deal for the acquisition of Cordillera Energy jells well with its ambitions to expand its operating regions. The company had spent about 36 percent of the $57 billion investments made during the last 10 years for acquisition alone. This helps the company to achieve 11 percent compounded annual growth rate for reserves besides 10 percent for production during the last one decade.
The current acquisition will add proved reserves of 71.5 million barrels of oil equivalent and net production of 18,000 BOE per day. Cordillera also has significant resource potential that includes 14,000 possible drilling locations in Anadarko Basic plays, where liquids are rich.
Apache has been in Anadarko Basin for more than 5 decades and has 40,000 net barrels of oil equivalent per day at the close of 2011. The latest acquisition allows Apache to more than triple the pace of its operated activity in the multi-play fairway of combined Apache and Cordillera acreage in 2012. According to the U.S. Geological Survey in 2010, approximately undiscovered 27.5 trillion cubic feet of natural gas and 410 million barrels of natural gas liquids are in the Anadarko Basin province.
The transaction would also provide access of Granite Wash, a geological formation, which has tight gas fascinated in its sands. Apache believes that multiple, stacked horizontal targets offer decades of possible drilling locations. The company indicated that the acquisition offers competitive edge in the existing commodity prices condition as 80 percent of revenue is generated from liquid hydrocarbons production.
The company expects the deal to be accretive to its earnings in 2012 and that the drilling development program would commence in 2013. EnCap Investments, which is selling Cordillera Energy, would get $600 million worth of Apache shares, subject to lock-in period clause. The rest of the consideration amount would be paid in cash that would be funded with debt. The company expects the deal to be closed in second quarter.
